Principal Issues: The tax consequences of the compensation received by a power of attorney under the Act.
Position: Question of fact, but will be either business income or income from an office.
Reasons: See response.
XXXXXXXXXX 2018-074925 C. Underhill March 11, 2019
Dear XXXXXXXXXX:
Re: Power of attorney compensation
We are writing in response to your email dated March 2, 2018, asking whether compensation received by an individual acting under a power of attorney (POA) is required to be included in the individual’s income under the Income Tax Act (Act). It is our understanding that the individual is not in the business of providing POA services. Thank you for your understanding regarding the delay of this response.
Our comments
This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of a particular transaction proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R8, Advance Income Tax Rulings and Technical Interpretations.
A POA is a legal document between two persons whereby a particular person appoints another person and confers authority to the other person to perform specific acts on the particular person’s behalf. Generally, compensation received by an individual for acting under a POA will be treated either as income from a business or as income from an office.
Where the individual is in the business of providing POA services, the compensation will be included in the business income of the individual under subsection 9(1) of the Act. In addition, pursuant to paragraph 153(1)(g) of the Act and Part I of the Income Tax Regulations (Regulations), the person who paid the compensation is required to report the amount on a T4A information slip, even if no amount of income tax has been withheld at source.
Where the individual does not provide POA services in the course of carrying on a business, the compensation is considered to be income from an office and is included in the individual’s income in the year of receipt under paragraph 6(1)(c) of the Act. In this situation, paragraph 153(1)(a) of the Act and Part I of the Regulations require the payor to withhold income tax on behalf of the individual and to report the amount on a T4 information slip.
We trust our comments will be of assistance to you.
Yours truly,
Jason R. Ward, CPA, CA
Acting Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch